Sunday, January 11, 2009

Poor Obama: Why We Can't Have Another Great Depression

One of the most annoying things about the Obama administration, in my view, has been its bad habit of "talking down" the U.S. economy. Historically, the liberals do better when the economy is perceived to be in a crisis. What most observers leave out, however, is that the typical liberal claim that the market system is failing us really doesn't add up when you really look at the history of our nation and our political economy.

I would like to take this moment to point out it is physically impossible for us to have another Great Depression. For example, we know much more about monetary policy now than we did in the 1930s. In addition, there are a lot of countercyclical system is in place which help us to keep the economy rolling along during its normal ups and downs. These systems include unemployment compensation, welfare payments to the poor, and large amounts of government employment itself -including our steady and consistent national military presence.

Also, I should point out there are a lot more government employees now than there were during the Great Depression. Part of the reason is that we have child labor laws now enforced across nation, and child labor laws make it impossible not to have schools, parks, and other facilities for keeping busy children and youth. Child labor laws also make the labor market tighter. One of the reasons we have Social Security is that it is a useful way of tightening up labor markets by making it easier for older people to retire. Finally, since we are cracking down on illegal immigration this also has the effect of tightening up the labor market.

It's in the interest of the Obama administration to have people thinking we might have another Great Depression. I'm shocked at the number of otherwise reasonable people who seem to think that this is a distinct possibility. I'm just here to remind them that no -- it really isn't.

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